The Senate and the House of Representatives ratified the bicameral conference committee report on the Tax Reform for Acceleration and Inclusion (TRAIN) bill late Wednesday night.
The Senate, voting 16-4 in a late session, ratified the final version of the TRAIN bill at the end of marathon deliberations, with Senators Panfilo Lacson, Riza Hontiveros, Bam Aquino and Antonio Trillanes III voting against the Duterte administration’s controversial revenue raising measure.
According to Senator Angara, its principal sponsor, the bicameral version of the TRAIN bill also ensured that milk and 3-and-1 coffee remain exempt from the proposed Sweetened Beverage (SB) Tax, now at P6 per liter for beverages using caloric and non-caloric sweeteners, and P12 per liter for beverages using high fructose corn syrup (HFCS).
As for the Petroleum Excise Tax, Angara assured that the bicameral conference provided for varied increases per petroleum product, but ensured to keep to a minimum the increases for LPG, diesel, and gasoline—which are commonly used by ordinary households and among the most sensitive products to consumers.
On the VAT Base Expansion, Angara said the Senate panel “increased the VAT threshold from P1.9 million to P3 million to benefit MSMEs, which represent up to 99 percent of all registered businesses in the country.”
While various leakages in the VAT system have been plugged, he said the bicameral conference retained the VAT exemptions for Senior Citizens, PWDs, Cooperatives, and zero-rating for renewable energy, tourism, and BPOs in special economic zones. In addition, starting 2019, drugs and medicines for diabetes, high cholesterol and hypertension will be VAT-free.
The conference also retained the VAT exemptions for socialized housing and of low-cost housing, based on the current rates found in the NIRC. Starting 2021, socialized and mass housing projects worth P2 million and below located both in and outside of Metro Manila will remain VAT-exempt.
On the provision covering the Automobile Excise Tax, Angara said: “We also made changes to the proposed schedule for automobile excise taxes, making it simpler to administer while retaining the progressivity of the rates.”
To encourage greener and cleaner transportation, electric vehicles shall be exempt while hybrid cars will be taxed at half the rates,” Angara added.
In ensuring progressive taxation, the Senator explained some taxes were raised, particularly those that affect high-income earners like the documentary stamp tax, the final tax on foreign currency deposit units, and tax on gains from shares of stocks not traded in the stock exchange. We aimed to promote fundamental fairness and progressivity throughout the tax system and spread the burden of the proposed tax reform. We worked to ensure that those who can’t, carry less, while those who can, carry more. Excise taxes were also imposed on invasive cosmetic procedures and body enhancements, and raised on non-metallic minerals and quarry resources.
Moreover, the bicameral conference decided that within the next five years after this measure’s enactment, 70% of all incremental revenues will be used for the Build, Build, Build program, for infrastructure to address urban congestion, to support military requirements, to build sports facilities for public schools, and potable drinking water supplies in all public places. The remaining 30% shall be devoted for social mitigating measures, with the extra funds from this measure:
- Households from the first to the seventh deciles under the DSWD’s Listhanan program (National Household Targeting System for Poverty Reduction) will receive a monthly P200 unconditional cash transfer for the first year and P300 for the next two years;
- Up to 2.8 million senior citizens could soon receive a monthly social pension in 2018.
- Road networks and public transportation systems will be improved, benefiting pedestrians and commuters, the majority of whom come from lower income groups;
- More poor households will be covered by government health projects for addressing obesity, diabetes, and other non-communicable diseases—also for combatting malnutrition, especially among children and pregnant and lactating women;
- The Department of Education (DepEd) will be able to install potable drinking water stations in some 3,600 elementary and secondary schools that don’t have a regular source of safe and clean water;
- Affected sectors like sugar farmers will receive greater government assistance to improve their productivity;
- Qualified PUJ franchise holders will receive fuel vouchers; and,
- Fare discounts in all PUVs, free skills training under TESDA, and discounts for NFA rice from accredited retail stores will be available for all minimum wage earners, unemployed, and the poorest 50% of the population.
The bill also exempts P250,000 annual taxable income, after members of the bicameral committee agreed to adopt a provision of the Lower House version that provides for a second tranche of the personal income tax reform that would further reduce income tax rates starting 2023.
“We pegged down the tax rates starting next year that would provide bigger tax relief up to year 2023,” said Senator Juan Edgardo Angara, Senate ways and means committee chairman. (“Ibinaba na po natin ang kaltas sa buwis simula next year, may mas malaking ginhawa pang naghihintay pagdating ng 2023.”)
Angara explained this was done to update the tax rates and make sure these are fair and reasonable for all employees, particularly ordinary workers.
“It was done so no workers will be left behind in the tax rate adjustments and avoid imposing higher taxes that will be unfair to ordinary workers,” Angara added.
The Senator said this is also in accord with the Duterte administration’s commitment to grant tax exemptions for those earning P20,000 and below.
Lawmakers sitting in the bicameral committee crafting the final version of the bill likewise adopted a proposal to “raise the tax exemption cap of 13th month pay and other bonuses to P90,000.”
At the same time, the TRAIN bill, once enacted into law, will mandate “simpler and easier” tax filing and payment for self-employed individuals and professionals to encourage workers to pay the right taxes.
The bicameral panel also endorsed an optional 8% flat tax for those earning below P3 million, allowing a choice between opting to pay the 8% flat tax or the schedular personal income tax.
For self-employed and professionals (SEP) earning below P250,000, they will likewise be exempt from income tax, while those with gross sales or receipts of P500,000 and below will be exempt from 3 percentage tax and the 8% flat tax will only be filed once a year, while VAT and percentage tax shall be filed quarterly. Currently, SEPs are required to file VAT and percentage tax returns every month. Under the bill, income tax returns will likewise be shortened “shortened and simplified” from the current 12 pages to only four pages.
Angara assured that apart from downward adjustments in tax rates, “we simplified the process of filing tax returns to make it easy for filers to pay taxes.”
In the House, the TRAIN ratification took only one minute, with less than 20 Representatives in attendance, and no objections or questions recognized on the floor
ACT Teachers Representative Antonio Tinio tried to object due to lack of quorum but was not recognized by House Deputy Speaker Raneo Abu.